As population levels soar there can be rich pickings within the food supply
chain.

Noticed the price of sugar lately? Potatoes? Fresh fruit? A weak pound, US drought and one of the wettest years on record for Britain have all contributed to the cost of your shopping basket soaring.

When sterling falls, your money buys fewer of the commodities that need to be imported. In fact, the recent sharp falls probably haven't had their full impact in yet.

But the story of rising food prices is about much more than currency swings. And it provides tempting possibilities for investors.

Extreme weather in 2012 led to sharp price rises in the likes of corn, wheat and soya beans, and these prices look likely to remain elevated for the next six months, according to Baring Asset Management.

There is also a long-term crunch between supply and demand. In fact, food production must increase by at least 70pc by 2050 to meet global demand. According to the United Nations, the world's population is forecast to increase from 7 billion to 9.3 billion over the next 40 years, and to meet this demand investment in food production is needed.

The Ecclesiastical Investment Management Amity Insight report Hungry Planet warned that our current food supply is just not sustainable in the medium to long term, and can only be solved through extensive investment in global agriculture, which will help increase crop yields.

Neville White, socially responsible investment analyst at Ecclesiastical, said: "Increased food production will have to be achieved with less land, water and people. Investing in companies with a focus on mechanisation, crop production and fertilisation that aim to increase food production can not only have a real impact on food but can also ensure that investors profit with principles."

There are two ways to invest in food: you can buy commodities through trading on the future price of a grain or crop and/or buying an exchange-traded fund. Or you can buy shares in agriculture and food-production related companies.

Sarasin AgriSar invests in the entire supply chain, from grain to supermarkets. This means that although you may miss out on large upsurges in the soft commodities market, growth should be smoother.

Henry Boucher, manager of the AgriSar fund, said that holding food-related shares was a more ethical way of investing – handing your money to companies in the chain reduces their capital cost and helps them invest to improve food supply. "Some speculators invest in food itself, which takes supply out of the market [if they store it for later sale at higher prices]," said Mr Boucher. "Commodity traders invest directly in corn, pork bellies, wheat and sugar. We're more interested in finding companies that help improve global productivity."

He cites investments like Japan's Kubota, which makes small rice transplanters, or Indian company Syngenta, whose fertiliser and seed pre-mix is designed to improve productivity by up to four times.

"Both make products for the small farmer – they can be used on land as little as one acre," he said. "This is not about mass-farming but helping the small businesses left in the Asian countryside."

Speculative "futures" investing in food markets can also be more volatile. Futures are short-term punts – one bad crop season, due to disease or extreme weather, may mean significant losses. Agriculture-related shares are held for longer and are less affected by natural disasters.

Jonathan Blake, manager of the Baring Global Agriculture fund, said last year's weather had enhanced the investment appeal of those companies providing the likes of seeds, herbicides and fertilisers, which will enable farmers to maximise their crop output.

"It will take time to address the shortfalls caused by the severe weather events of 2012, from droughts in America to washout conditions in the UK and Europe," said Mr Blake. "We do, however, expect crop prices to come down later in 2013, providing we have a year of 'normal' weather, as significantly improved output will allow inventory levels to begin to be rebuilt."

The Baring fund has a sizeable proportion of listed fertiliser, herbicide and seed producers.

"Crop production, through the continuous cycle of planting, growing and harvesting, robs the soil of nutrients," said Mr Blake. "As a result, these nutrients need replenishing through the application of fertilisers. Additionally, for many farmers these nutrients are highly affordable given the current high prices farmers are able to get for their crops."

Schroders Climate Change manager Simon Webber also likes investing in companies that offer productivity solutions which will help bring down the price of food through use of their products to increase farming production. He also invests in Syngenta and US company Trimble Navigation, which provides solutions for levelling fields.

It is not just population growth that provides investment opportunities in the food sector, but the change in global diets. As disposable incomes swell in emerging markets, diets tend to become more Westernised. The AgriSar fund invests in Asian supermarket chain Dairy Farm, whose revenues have risen as the expanding middle classes change their dietary and shopping habits.

"Incomes in China are increasing at 10pc a year," said Mr Boucher. "People are no longer going to the market daily but visit a supermarket once a week, where they will be buying more meat, dairy products and imported vegetables."

Mr Webber said that on top of the global demand for more agricultural produce are the effects on supply, where available productive land is in decline, yield growth is reducing and there is a growing competition from the biofuel industry for feedstock.

"Climate change acts as a threat multiplier to the sector on top of the dual impacts of increased demand and decreased supply, presenting various investment opportunities. The sectors that will benefit from this are companies involved in agricultural production as well as food retailers, whose share price will increase as food prices inflate."